Lesson: 50

Topic: Cash Payments Journal

Objectives:

The primary focus of this topic is the Cash Payments Journal which we use to record cash receipts and payments, along with their associated entries to the GST payable account.

In addition, we will note how Sales Discounts and Purchase Discounts are accounted for within the entries to these special journals.

 

Cash Payments Journal
Date	Particulars	Other Accounts Debit			Wages	Purchases	Accounts Payable	Cheque No.	Bank
		Account	P.R.	Amount	(DR.)	(DR.)	(DR.)		(CR.)
May 1, 2008	Commercial Space Inc.	Rent Expense	510	1,000.00				125	1,000.00
May 8, 2008	Super Suppliers Corp.					1,470.00		126	1,470.00
May 14, 2008	D. Smith	D. Smith, Drawings	302	500.00				127	500.00
May 15, 2008	Jimmy's Supply Co.						1,620.00	128	1,620.00
May 22, 2008	Flora Johnson				800.00			129	800.00
May 31, 2008				1,500.00	800.00	1,470.00	1,620.00		5,390.00

The Cash Payments Journal is used only to record cash purchases or the payments we make on our accounts payable. Credit purchases are recorded within the Purchases Journal.

Points to Remember: 1) GST is only recorded on cash purchases. We will not record GST if we are remitting payment on a previous credit purchase, because the GST was already accounted for within the Purchases Journal back when we initially made the purchase.

2) Calculate the "Purchases Discount" on the TOTAL account payable. As an example, if we purchased an item for $1000.00, plus GST of $70.00, we would owe a total of $1070.00. A discount of 2/10, n/30 would mean that we could save $21.40 (2% of $1070.00) if we were to pay the total bill within 10 days.

Method of Instruction and Evaluation:

After a Socratic lecture on the above topics, students will complete the Cash Payments Journal section of Exercise #4 on page 552 of the text (pages 423-429 in the workbook).

Expectations Addressed:

The "Advanced Accounting Practices" strand of the BAF3M Ministry of Education Curriculum Guidelines outlines all of the following specific expectations. The expectations addressed by this lesson have been highlighted below.

• The Accounting Cycle for a Merchandising Business:
  • describe the principal accounting elements particular to a merchandising business (e.g., new accounts, cost of goods sold section, returns, discounts);
  • identify and describe the periodic and perpetual inventory systems and journalize transactions using both systems;
  • assess the effects that transactions have on the accounts and financial statements of a merchandising business;
  • record transactions in the journals and ledgers of a merchandising business;
  • prepare a trial balance and the financial statements, including a detailed cost of goods sold section, for a merchandising business;
  • record the adjusting and closing entries for a merchandising business (e.g., accruals, inventory adjustment);
  • describe the impact of year-end procedures, including adjusting and closing entries, on the financial statements of a merchandising business;
  • describe alternative accounting practices (e.g., special journals and ledgers).
• Accounting for Sales Tax:
  • describe the accounting practices particular to sales tax (e.g., accounts required, financial statement presentation);
  • record transactions related to provincial sales tax (e.g., collections, remittance);
  • record transactions related to federal sales tax (e.g., collections, remittance).
• Computer Applications in Accounting:
  • use accounting or application software to record transactions for a service business;
  • use accounting or application software to record transactions for a merchandising business;
  • use accounting or application software to prepare financial statements.

Reference:

Please read this topic (pages 546 - 547) in preparation for the class.

Handout: Understanding the Cash Payments Journal